– Nuisance claims serious for P3 projects

National Post

Work on the Canada Line rapid transit system in Vancouver in 2007. A recent court ruling made the systems owners liable for losses by a local business. It cost them $600,000.

Work on the Canada Line rapid transit system in Vancouver in 2007. A recent court ruling made the system's owners liable for losses by a local business. It cost them $600,000.

Donalee Moulton

Noise, inconvenience and disruption go hand in hand with construction projects. Now, a spring ruling from the Supreme Court of British Columbia may make those everyday realities a very costly component of doing business for public-private partnership (P3) projects in this country.

In Heyes v. City of Vancouver, the province’s Supreme Court ruled that the South Coast British Columbia Transportation Authority, Canada Line Rapid Transit Inc., and InTransit BC were liable for adversely affecting a local maternity clothing business — a finding that cost them more than $600,000. The case is under appeal.

“This was a nuisance claim,” notes Dianne Saxe, an environmental lawyer based in Toronto. Such claims, she says, have been out of fashion for some time — principally because of government statutes prohibiting them.

With Ms. Heyes (and two other recent decisions), they may be back. Here’s what happened. Heyes owned a maternity wear shop called Hazel & Co. The company had relocated, and business picked up.

However, a major P3 project, the Canada Rapid Transit Line designed eventually to connect downtown Vancouver, Richmond, and the Vancouver International Airport, was planned for this area. Ms. Heyes determined she could endure any disruption associated with construction of the Canada Line as long as it was being built by means of what was called a bored tunnel, which would not disturb the street surface.

Therefore, she exercised the right to renew her lease and pushed for a five-year term instead of the three-year term her landlord originally offered. “There was no provision in the lease permitting termination at the option of the lessee should Canada Line construction interfere with business operations,” Justice Ian Pitfield noted in his 72-page decision.

And interfere it did. After signing the lease, Ms. Heyes learned through media reports that the project would proceed by cut-and-cover construction — an open trench, as opposed to a bored tunnel. Initial reports indicated open-trench construction in front of any business would not last longer than three months. It lasted three years and negatively impacted Ms. Heyes’ business.

So off to court they went. The ultimate question, said Justice Pitfield was this: “Does the balancing involved in a ‘give-and-take’ or ‘live-and-let-live’ analysis for the purpose of identifying compensable nuisance require a single enterprise to absorb an undisputed business loss of more than $500,000 for the benefit of the public as a whole in order that some or all of the defendants may reduce the cost of construction?

“In my opinion,” he said, “the answer can only be no.”

The implications of that opinion are significant, notes Ms. Saxe. “It does signal a very serious risk.”

That risk comes on two fronts. First, the decision to use cut-and-cover construction methods was not made by the partners in the project. It was made by the federal government.

“The people making the financial decisions are not being held liable because they are not doing the building,” notes Ms. Saxe.

Another issue that pops up frequently in the Heyes case was construction delays. “Insult was added to injury,” says Ms. Saxe, “because they kept telling her it would only be a few months.”

From a legal standpoint, bidders, with the help of their lawyers, may want to start sprinkling more protections into their bids. Ms. Saxe is not convinced, however, that this will be effective.

“The federal government always gets its way in these situations,” she notes. “The federal government could be asked to accept responsibility for their decisions, but it is unlikely to do so.”

“Lawyers,” stresses Ms. Saxe, “need to think about how they can minimize impact.”

That thinking is stepping into high gear with decisions from two other recent cases underscoring the message in Heyes.

In St. Lawrence Cement Inc. v. Barrette, the Supreme Court of Canada grapples with the issue of neighbourhood disturbances resulting from the operation of a cement plant, while Connecticut v. American Electric Power Co., out of the U.S. Court of Appeals for the Second Circuit, is a public nuisance lawsuit filed by eight state attorneys general, the City of New York and three land trusts against six electric power companies based on greenhouse gas emissions.

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